The Borrowing Habits of Alternative Financial Services Customers

Boston, June 2, 2011 – A new report from Aite Group examines the use of alternative financial services like prepaid cards, payday loans, check-cashing services, pawn shops, loan sharks, and even family and friends, as a source of funds for customers of alternative financial services. Based on a Q1 2011 Aite Group survey of 500 U.S. consumers, the report evaluates how consumer use of these services changed between 2009 and 2010.

There is a good deal of stigma and misunderstanding surrounding the use of alternative financial services in the United States; alternative financial services are often seen as a source of funds for those with few alternatives. In reality, most of these consumers are neither disadvantaged nor unbanked/underbanked individuals: 78% of respondents have a checking account, three-quarters have a debit card tied to that checking account, nearly half have a credit card, and roughly one in five currently have (or had at some point in 2010), a payroll card or government benefit card.

“Making assumptions about the users of alternative financial services should be avoided,” says Ron Shevlin, senior analyst with Aite Group and co-author of this report. “These services provide value to those who choose to use them. There’s strong evidence that customers of alternative financial services are not trapped in a cycle of using these services, nor are they necessarily unbanked or underbanked.”